SW Acquisition Co., Inc. v. Akzo Nobel Paints, L.L.C.

2022 Ohio 3674, 200 N.E.3d 326
Ohio Court of Appeals·Decided October 13, 2022·No. 111327·Published·Cited by 1 cases

Opinion

COURT OF APPEALS OF OHIO

EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

SW ACQUISITION CO., INC., :

Plaintiff-Appellee, :

No. 111327

v. :

AKZO NOBEL PAINTS, LLC, ET AL., :

Defendants, :

[Appeal by PPG Architectural : Finishes, Inc.,

Defendant-Appellant.] :

JOURNAL ENTRY AND OPINION

JUDGMENT: AFFIRMED

RELEASED AND JOURNALIZED: October 13, 2022

Civil Appeal from the Cuyahoga County Common Pleas Court Case No. CV-18-904917

Appearances:

Strauss Troy Co., LPA and Philomena S. Ashdown, for appellee.

Thompson Hine LLP, Timothy J. Coughlin, Mark R.

Butscha, Jr., and Brenna L. Fasko, for appellant.

EILEEN A. GALLAGHER, P.J.:

Defendant-appellant PPG Architectural Finishes, Inc. (“PPG”)

appeals from an order of the Cuyahoga County Court of Common Pleas denying its motion to disqualify counsel for plaintiff-appellee SW Acquisition Co., Inc. (“SWAC”) under Prof.Cond.R. 3.7. PPG contends that the common pleas court abused its discretion in refusing to disqualify SWAC’s counsel, attorney Philomena Ashdown and her law firm, Strauss Troy Co., LPA (“Strauss Troy”), from representing SWAC in proceedings before the common pleas court and in a related, yet-to-be-filed arbitration proceeding because (1) attorney Ashdown and Strauss would likely be “necessary witnesses” in the arbitration and (2) attorney Ashdown and Strauss Troy’s representation of SWAC in the arbitration would likely “require them to defend (or abandon) their prior work,” creating an “inherent conflict of interest” under Prof.Cond.R. 1.7 and 1.9.

For the reasons that follow, we affirm the common pleas court.

Procedural and Factual Background In September 2009, Miller Brothers Wallpaper Company, Inc.

(“Miller Bros.”) and Akzo Nobel Paints, LLC (“Akzo Nobel”), the predecessor-in- interest to PPG, entered into (1) an asset purchase agreement (the “APA”), pursuant to which Miller Bros. purchased certain retail paint stores and other assets from Akzo Nobel, and (2) an authorized dealer agreement (the “ADA”), pursuant to which Miller Bros. became a “semi-exclusive dealer” of certain Akzo Nobel paint products. Strauss Troy represented Miller Bros. in the negotiation, execution and closing of the ADA and the APA. Attorney Ashdown was not involved in the representation of Miller Bros. in connection with the ADA or APA.

The ADA contained a broadly worded arbitration provision, which states, in relevant part:

Any controversy or claim arising out of or relating to this Agreement or breach of this Agreement shall finally be settled by binding arbitration before a single arbitrator (the “Arbitration Tribunal”) who will be jointly appointed by the Parties. The Arbitration Tribunal will selfadminister the arbitration proceedings utilizing the Commercial Rules of the American Arbitration Association (“AAA”); however, the AAA will not be involved in the administration of the arbitration. The arbitrator must be a retired judge of a state or federal court of the United States or a licensed lawyer with at least ten (10) years of corporate or commercial law experience from a law firm with at least 10 attorneys and at least an AV rating by Martindale Hubbell. If the parties cannot agree on an arbitrator, either party may request, any judge located in Cuyahoga County, Ohio to appoint an arbitrator, which appointment shall be final. The arbitration will be held in Cleveland, Ohio. Each party will have discovery rights as provided by the Federal Rules of Civil Procedure within the limits imposed by the arbitrator;

provided, however, that all such discovery will be commenced and concluded within sixty (60) days of the selection of the arbitrator, unless otherwise agreed by the parties. It is intent of the parties that any arbitration will be concluded as quickly as reasonably practicable.

* * * This agreement will be enforceable, and any arbitration award will be final and non-appealable, and judgment thereon may be entered in any court of competent jurisdiction.

ADA at ¶ 21.

Miller Bros. filed for bankruptcy in October 2012. Attorney Ashdown and Strauss Troy represented Miller Bros. in the bankruptcy proceeding.

The voluntary bankruptcy petition was signed and filed by ttorney Ashdown and was also signed by Miller Bros.’ president and sole shareholder, Victor

Wells, who declared “under penalty of perjury” that the information provided in the petition was “true and accurate.”

On Schedule B of its bankruptcy petition, on which Miller Bros. was to list “all [of its] personal property,” including “contingent and unliquidated claims of every nature” and the “estimated value of each,” Miller Bros. listed a “potential claim against former supplier [Akzo Nobel] for breach of contract.” It identified the “[c]urrent [v]alue of [d]ebtor’s [i]nterest [i]n [that] [p]roperty” as “0.00.” No other claims were listed on the schedule.

In January 2013, the bankruptcy court approved Miller Bros.’ sale of its assets to SWAC. Miller Bros.’ bankruptcy case was dismissed in July 2013.

In September 2013, SWAC filed a complaint in the Hamilton County Court of Common Pleas (the “Hamilton County complaint” or the “Hamilton County action”) against Akzo Nobel and John Does 1-10. SWAC averred that it had acquired “all causes of action of Miller Bros.” by virtue of its purchase of Miller Bros.’ assets during the bankruptcy proceeding and asserted “causes of action” for fraud, breach of contract and punitive damages against the defendants.

SWAC alleged that Akzo Nobel had fraudulently induced Miller Bros.

to enter into the APA by providing false financial information. SWAC further alleged that Akzo Nobel had overbilled Miller Bros. for products purchased and sold pursuant to the APA, had refused to provide Miller Bros. with credits required by the APA, had misquoted prices and costs of materials and had “guaranteed” Miller Bros. “a profit percentage of 28%” on all Akzo Nobel products sold by Miller Bros.

(but had failed to deliver on that guarantee) in breach of the terms of the APA. SWAC also alleged that although Miller Bros. and Akzo Nobel had expressly agreed that Miller Bros. would have “the exclusive right to sell Akzo Nobel products within a specified geographical area,” Akzo Nobel had “knowingly” and “intentionally” violated the APA by selling products directly to customers in Miller Bros.’ “protected [dealership] area.” SWAC claimed that Akzo Nobel’s actions caused Miller Bros.’ bankruptcy and sought to recover compensatory and punitive damages from Akzo Nobel.

Attorney Robert Kelly represented SWAC in the Hamilton County action. In October 2013, the case was removed to the United States District Court for the Southern District of Ohio (the “federal case”). Attorney Kelly continued to represent SWAC following removal.

In December 2013, PPG, successor-by-merger to PPG Architectural Coatings, L.L.C., f.k.a. Akzo Nobel, filed a motion to dismiss and compel arbitration in the federal case. The federal court granted the motion and dismissed the complaint without prejudice. SW Acquisition Co. v. Akzo Nobel Paints LLC, S.D. Ohio No. 1:13-cv-785-JW, 2014 U.S. Dist. LEXIS 56813 (Apr. 23, 2014).

In October 2018, SWAC, then represented by attorney Kelly, filed a complaint against Akzo Nobel, PPG Industries, Inc. and John Does 1-101 in the Cuyahoga County Court of Common Pleas. The complaint, which was amended in

1 The John Doe defendants were later dismissed.

December 2018,2 requested appointment of an arbitrator “to fully and finally resolve all claims between the parties” in accordance with the ADA’s arbitration provision. SWAC averred that the claims it sought to arbitrate “included” but were “not limited to” the fraud and breach-of-contract claims it had previously asserted against Akzo Nobel in the Hamilton County complaint. Amended Complaint at ¶ 20. SWAC also averred that the Hamilton County complaint, “which set forth [its] known claims[,] * * *[,] may be amended to include additional items during the course of discovery in the arbitration process.” Id. at ¶ 21.

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SW Acquisition Co., Inc. v. Akzo Nobel Paints, L.L.C., 2022 Ohio 3674, 200 N.E.3d 326 (Ohio Ct. App. 2022).

2022 Ohio 3674 (SW Acquisition Co., Inc. v. Akzo Nobel Paints, L.L.C.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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